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Projections for 2022
Much like kids at Christmastime who start to dream about next year’s presents right after opening this year’s gifts, the crop markets start preparing and guessing for next year’s crop data as this year’s crop harvest comes to a close. Projections for 2022 crop acreage have begun to roll in over the last couple of months, but the tenor of those estimates has shifted during the harvest. The early estimates reflected the bullishness of the significant crop prices this year. Later estimates have tempered those prices with the matching increases in agricultural inputs. Let’s explore those projections and the factors that shaped them.
One of the earliest sets of projections came from Farm Futures magazine. In August, they surveyed producers to test the waters for plans on the next crop year. With corn prices averaging $6.32 per bushel and soybean prices averaging $13.70, producers responded with optimism for 2022, indicating they plan to plant 94.3 million acres to corn and 90.8 million acres to soybeans. Given the current acreage estimates for 2021, that is a one million acre increase for corn and a 3.6 million acre increase for soybeans. Both crops were looking to capture a sizable boost in area. At roughly the same time, the Food and Agricultural Policy Research Institute (FAPRI) was preparing the mid-year update of its agricultural baseline model. While the model wasn’t quite as positive as the survey, the crop acreage estimates were still large, with 93.3 million acres of corn and 87.9 million acres of soybeans.
As harvest has progressed, crop prices have been range-bound, but ag input costs have not. USDA reports fertilizer prices each week for central Illinois. At the end of August, anhydrous ammonia was pricing at $750 per ton, urea was at $575 per ton, and potash was roughly $622 per ton. By the end of October, ammonia prices had increased 60%, urea prices were up 41%, and potash prices jumped 25%. Fertilizer prices ramped up due to limited supplies, supply chain problems, some international trade restrictions, and the heightened demand shown in the early acreage estimates. Some agricultural chemicals, and ag land rents and values, are also rising in value. The higher input costs are squeezing expected crop margins for 2022, and therefore, influencing expected crop acreage. But the level of influence is the great debate at the moment.
S&P Global Platts foresees a sizable tilt away from corn and toward soybeans, with 90 million acres of corn and 90.4 million acres of soybeans. That would be a 3.3 million acre decline in corn plantings, with nearly all of that switching to soybeans. Hence, Platts is projecting the total area devoted to corn and soybeans to stay steady. IHS Markit (formerly Informa), on the other hand, projects that total area for corn and soybeans will now decline, with 92.4 million acres of corn and 87.4 million acres of soybeans. Under their projections, corn drops nearly a million acres and soybeans only gain 200,000 acres.
But the projection most have been waiting for is now out. USDA provided their first glimpse at the 2022 crop season. And as far as acreage is concerned, USDA was much closer to the IHS Markit numbers. For corn, USDA projects 92 million acres will be planted, down 1.3 million (Table 1). With a trend yield of 181 bushels per acre, that would result in corn production of 15.24 billion bushels. While USDA has lower acreage, it sees the potential for yields to more than offset that loss. In fact, these projections are for a record yield and production in 2022. So corn supplies are expected to remain large next year.
On the corn demand side, overall usage is expected to be robust as well. Feed and residual use is projected to increase by 100 million bushels, offsetting the same size decline in exports, leaving total corn usage at 14.83 billion bushels, the same as forecast for the 2021 marketing year. Corn usage for ethanol is expected to remain below pre-COVID levels. The gain in production and steady total usage translate to higher ending stocks, with stocks rising to 1.9 billion bushels. The 2022-23 season- average price is projected to fall to $4.80 per bushel, 65 cents below the 2021 price estimate.
Under USDA’s 2022 projection, soybeans will only gain a small amount of the cropland corn lost, with plantings increasing to 87.5 million acres (Table 2). Given a trend yield of 51.5 bushels per acre, soybean production is projected at 4.465 billion bushels, 40 million bushels above this year’s crop. Combined with stocks going into the 2022 marketing year, that puts total soybean supplies above 4.8 billion bushels.
Soybean usage is projected to grow as well. Domestic crush is expected to increase by 50 million bushels, mainly driven by biofuel demand for soybean oil. Soybean exports are estimated to increase by 90 million bushels, with the bulk of the beans headed to Asian ports. Total soybean usage will roughly equal the total the market experienced in 2020. That will bring 2022-23 ending stocks down to 321 million bushels, but USDA still expects prices to fall. The 2022-23 season-average price estimate is set at $10.50 per bushel.
Taken as a whole, USDA’s projections indicate crop revenues in the 2022 marketing year will be lower than those in 2021, but higher than we saw in 2020. With the higher input costs already being penciled in, profit margins will be squeezed in the coming year. The extent of that squeeze will depend on producers’ ability to manage costs and capture pricing opportunities from the markets. And currently, the markets are offering some hope. Current futures for the 2022 crops point to season-average prices above USDA’s projections, with corn pricing in the $5.35 per bushel range and soybeans pricing around $11.95 per bushel. The after-effects of a drought on the markets are typically some longer-term pricing advantages, as both nearby and deferred futures are boosted by the weather problems. Based on the projections for 2022, we are seeing those after-effects for the 2020-21 drought now.
For more details on the impact of these reports, view the latest Ag Outlook Presentation video.
Chad E. Hart, extension economist, 515-294-9911, email@example.com